Install

Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

BUSINESS WEEK IN REVIEW: september 20 to 26




Shokhin Splits


The divided new government of Prime Minister Yevgeny Primakov was thrown into further turmoil last week when one of the new top ministers, the free-market advocate Alexander Shokhin, announced he was quitting the Cabinet after just 10 days in office.


Shokhin, 46, said he did not want to be in a Cabinet that also had Mikhail Zadornov, 35, as its member. Zadornov, known as a reform-minded liberal, was reappointed as finance minister.


President Boris Yeltsin approved a new structure for the government, overhauling several ministries and giving influential regional leaders seats in the Cabinet's inner circle.


The Cabinet includes such diverse economic views among its remaining members f ranging from communists to advocates of free markets f that many observers question if it can come up with a coherent economic policy.


The International Monetary Fund said it would consider disbursing more money to Russia only after it has seen a concrete economic plan from the new government; an IMF delegation is expected back in town Oct. 12 to discuss a new $4.3 billion loan.


State Control


Prime Minister Yevgeny Primakov's outline for a new economic plan inlcudes paying off wage and pension arrears; imposing state control on alcohol production and sales; and controling ruble trading.


The government will take a controlling stake in enterprises producing beverages with an alcohol content higher than 28 percent, although analysts doubted the effectiveness of the measure, saying it would encourage illegal distilleries to open up.


The Central Bank has barred 15 commercial banks from currency trading on the country's major market, the Moscow Interbank Currency Exchange, for not revealing their debt situation, fearing the banks would buy dollars and transfer them to their foreign bank accounts.


The ban made it easier for the Central Bank to defend the ruble, but the move has fueled criticism from analysts who claimed the Bank manipulated the exchange rate.


Despite the country's crisis, the official ruble rate, set by the Central Bank, strengthened during the week from 16.38 to the dollar to 15.88 at the end of the week.


The government has decided to cancel the sale of a 75 percent stake in the state-controlled oil company Rosneft, saying the economic crisis had rendered the privatization futile.


Frozen Debt


Russia's relations with its foreign creditors turned to Cold War as Central Bank chairman Viktor Gerashchenko warned that "excessively greedy" and "stubborn" foreign banks would receive no further compensation for their restructured short-term debt holdings.


U.S. investment bank Lehman Brothers has frozen the British bank accounts of Russia's Inkombank and Uneximbank in an effort to retrieve outstanding debt.


Inkombank owes $87 million and Uneximbank owes $25.9 million to Lehman Brothers on currency forward contracts; Lehman's legal action may be the first of many by angry foreign investors, analysts said.


Germany's second largest bank, Dresdner Bank, announced it has made provisions of 600 million Deutsche marks ($360 million) to cover 60 percent of its unsecured loans to the Kremlin and Russian companies.


A group of 12 major international banks has put up $3.5 billion to prop up Long-Term Capital Management, a high-risk U.S. hedge fund that has lost a substantial amount of money in Russia's financial markets.


United Bank of Switzerland has lost $685 million due to its stake in Long-Term Capital Management, while Morgan Stanley announced a $110 million bailout for one of its emerging market funds.


Move the Press


One of Russia's largest printing presses, Moskovskaya Pravda, marked two milestones f its 75th anniversary and its transfer from the state to the Moscow city government.


The Central Bank gave individual depositors until Oct. 10 to decide if they want to transfer their savings from six ailing banks to state-owned Sberbank.


Commercial Russian banks were unable to free up frozen depositors' accounts despite a cash injection from the Central Bank.